Singapore-listed stapled group CDL Hospitality Trust (CDLHT) (SGX:J85)has announced Asset Enhancement Initiatives (AEI) for the Orchard Hotel Shopping Arcade. The property will be respositioned as a family-centric mall with enhanced retail offerings.

Artist's impression of Orchard Hotel Shopping Arcade post AEI.

The AEI will comprise an overhaul of the property facade and existing amenities. Renovation works are scheduled to commence in late 2013 and is expected to complete in 12 months, during which the mall will be closed. A soft opening of the revamped mall is expected by end 2014.

The AEI is expected to cost approximately S$25.0 million, including construction costs, estimated disruption costs to the adjoining Orchard Hotel, and the loss of rental income during the period of mall closure. However upon completion of the AEI, Orchard Hotel Shopping Arcade will feature an increased net lettable area of approximately 10,000 square feet.

Incremental rental income is expected to be more than S$2.0 million on an annualised basis. This would translate into an estimated gross return on investment of more than 8.0 perccent on the AEI. The construction costs will be fully funded by debt.

Overall, the AEI is largely seen as an opportunity to better posture Orchard Hotel Shopping Arcade for the retail crowd that throngs the area. Mr Vincent Yeo, CEO the Manager said, “This undertaking will enable us to realise the full potential of Orchard Hotel Shopping Arcade and further unlock greater value from our existing properties.”

CDL Hospitality Trusts is a stapled group comprising CDL Hospitality Real Estate Investment Trust, a real estate and CDL Hospitality Business Trust. As at 31 March 2013, CDL Hospitality REIT owns 12 hotels and one resort with a total of 4,420 rooms. Units of CDL Hospitality Trust are currently trading at S$1.93 on the SGX.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.